Three pictures of contract: Duty, power, and compound rule

New York University Law Review

Volumn 83, Issue 6, 2008, Pages 1726-1783

  Klass, Gregory ^a  

^a GEORGETOWN UNIVERSITY LAW CENTER   (United States)

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EID: 58649108934     PISSN: 00287881     EISSN: None     Source Type: Journal    
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References (357)

1. Lon L. Fuller, Consideration and Form, 41 COLUM. L. REV. 799, 806-07 (1941). Fuller himself espoused a mixed theory of contract-as both conferring powers and imposing duties on the basis of reliance and unjust enrichment.
2. See id. at 806-13 (discussing how private autonomy, reliance, and unjust enrichment can all justify imposition of contractual liability).
3. CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION 17 (1981);
4. see also id. at 132 ("The law of contracts ... is a ramifying system of moral judgments working out the entailments of a few primitive principles-primitive principles that determine the terms on which free men and women may stand apart from or combine with each other.").
5. These two competing pictures reappear in the theory of promising. See Michael Pratt, Promises and Perlocutions, in SCANLON AND CONTRACTUALISM 93, 93-94 (Matt Matravers ed., 2003) (distinguishing between "volitionist" and "perlocutionary" theories of promise).
6. When I speak of "contract theory" in this Article, I mean general theories of contract law as a whole. Scholarly treatments of individual doctrines or rules can also presuppose one or the other of these pictures. David Slawson, for example, suggests applying lessons from administrative law to the analysis of standard form contracts, suggesting a power-conferring picture of contract. W. David Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 HARV. L. REV. 529 (1971);
7. see also, e.g., Stephen J. Choi & G. Mitu Gulati, Contract as Statute, 104 MICH. L. REV. 1129 (2006) (proposing application of principles of statutory interpretation to boilerplate). I discuss other doctrinal analyses that assume the power-conferring picture in Part III.
8. See Randy E. Barnett, A Consent Theory of Contract, 86 COLUM. L. REV. 269 (1986) [hereinafter Barnett, Consent Theory] (arguing that consent theory of contract is most plausible and coherent account of contractual obligation);
9. Randy E. Barnett, The Sound of Silence: Default Rules and Contractual Consent, 78 VA. L. REV. 821 (1992) [hereinafter Barnett, Sound of Silence] (reconciling concept of default rules with consent theory of contract).
10. Curtis Bridgeman has recently begun constructing an argument that Barnett's position is compatible with a corrective-justice or harm-based theory of contract law. Curtis Bridgeman, Reconciling Strict Liability with Corrective Justice in Contract Law, 75 FORDHAM L. REV. 3013, 3039-40 (2007);
11. see also Ernest J. Weinrib, Punishment and Disgorgement as Contract Remedies, 78 CHI.-KENT L. REV. 55, 66 (2003) ("The contract effects a voluntarily assumed change in the pre-existing legal relationship between the contracting parties ...."). In several recent papers, Michael Pratt has also adopted the thesis that contract is a normative power in the Razian sense, though, so far, as an unargued assumption.
12. Michael G. Pratt, Contract: Not Promise, 35 FLA. ST. U. L. REV. (forth-coming 2008), available at http://ssrn.com/abstract=1010229 [hereinafter Pratt, Contract: Not Promise];
13. Michael G. Pratt, Promises, Contracts and Voluntary Obligations, 26 LAW & PHIL. 531, 533 (2007) [hereinafter Pratt, Promises, Contracts and Voluntary Obligations].
14. E.g., P.S. Atiyah, Contracts, Promises and the Law of Obligations, 94 LAW Q. REV. 193 (1978).
15. FRIED, supra note 2, at 20. For a more recent promissory theory that "the reason contracts are enforced is because it is wrong not to keep one's word," see Stephen A. Smith, Performance, Punishment and the Nature of Contractual Obligation, 60 MOD. L. REV. 360, 367 (1997).
16. For the purposes of this analysis, I take the contract law we have to be the collection of rules that canonical sources such as the Restatements, the Uniform Commercial Code, and the major treatises identify as the law of contract, with occasional reference to judicial application of those rules.
17. Jody S. Kraus, Legal Theory and Contract Law: Groundwork for the Reconciliation of Autonomy and Efficiency, in LEGAL AND POLITICAL PHILOSOPHY 385, 395-410 (Enrique Villanueva ed., 2002). This mode of analysis is also distinct from what Kraus calls "causal explanatory" and "predictive" legal theory.
18. Id. at 395-96, 400.
19. Id. at 396.
20. H.L.A. HART, THE CONCEPT OF LAW 81 (2d ed. 1994). The above passage comes from Hart's introduction of the distinction between primary and secondary rules, which Hart tended to conflate with the distinction between duties and powers. Hart himself generally assumed that contract law was a private, power-conferring rule. See, e.g., id. at 27-28, 96, 250.
21. See, e.g., WESLEY NEWCOMBE HOHFELD, FUNDAMENTAL LEGAL CONCEPTIONS AS APPLIED IN JUDICIAL REASONING (Walter Wheeler Cook ed., 1919);
22. HANS KELSEN, GENERAL THEORY OF LAW AND STATE 123-61 (Transaction Publishers 2006) (1949);
23. Andrew Halpin, The Concept of a Legal Power, 16 OXFORD J. LEGAL STUD. 129 (1996);
24. H.L.A. Hart, Bentham on Legal Powers, 81 YALE L.J. 799 (1972).
25. See infra Part III.
26. RESTATEMENT (SECOND) OF CONTRACTS § 21 (1981); see also infra notes 84-91 and accompanying text.
27. There are several other connections between power-conferring rules and dutyimposing rules. First, power-conferring rules impose a duty on persons charged with enforcement to respect the exercises of the power. Second, some power-conferring rules are duty imposing in the more attenuated sense that they entail that persons ought to obey duties created by valid exercises of the power. Joseph Raz, Voluntary Obligations and Normative Powers (pt. 2), in 46 PROC. ARISTOTELIAN SOC'Y 79, 89 (Supp. 1972).
28. Third, duty-imposing rules that create private remedies are also power conferring, since "one individual [is] given by the law exclusive control, more or less extensive, over another person's duty." H.L.A. Hart, Bentham on Legal Rights, in OXFORD ESSAYS IN JURISPRUDENCE 171, 192 (A.W.B. Simpson ed., 2d ser. 1973) [hereinafter Hart, Bentham on Legal Rights].
29. A fourth connection can be found in Hart's suggestion that criminal excuses like mistake, accident, provocation, duress, and insanity are best understood by analogy to the role mistake, accident, and duress play as invalidating conditions in private powerconferring rules. H.L.A. HART, Legal Responsibility and Excuses, in PUNISHMENT AND RESPONSIBILITY: ESSAYS IN THE PHILOSOPHY OF LAW 28 (1968) [hereinafter HART, Legal Responsibility and Excuses].
30. By ensuring that criminal punishment is applied only to voluntary actions, these doctrines "maximiz[e] within the framework of coercive criminal law the efficacy of the individual's informed and considered choice in determining the future and also his power to predict that future." Id. at 46;
31. see also id. at 49 ("[Excusing conditions ... provide for all individuals alike the satisfactions of a choosing system."). That is, Hart claims that criminal law has something in common with private legal powers: The criminal doctrines of mistake, coercion, and insanity permit the individual to "weigh the cost to him of obeying the law-and of sacrificing some satisfaction in order to obey-against obtaining that satisfaction at the cost of paying 'the penalty.'"
32. Id. at 47. In contrast to all of these connections, my thesis is that a law might be structured so that the very act of satisfying it could be correctly described either as the antecedent condition of a duty or as the exercise of a power, depending on the circumstances.
33. See HOMER H. CLARK, JR., THE LAW OF DOMESTIC RELATIONS IN THE UNITED STATES §§ 2.1-2.4 (2d ed. 1988) (describing laws governing formal and informal marriage).
34. For a discussion of the concept of directed obligations, see MARGARET GILBERT, A THEORY OF POLITICAL OBLIGATION 35-41 (2006).
35. For the idea of voluntary obligations, see infra notes 145-53 and accompanying text.
36. DANIEL C. DENNETT, True Believers: The Intentional Strategy and Why It Works, in THE INTENTIONAL STANCE 13, 16-17 (1987).
37. See JULES L. COLEMAN, THE PRACTICE OF PRINCIPLE: IN DEFENCE OF A PRAGMATIST APPROACH TO LEGAL THEORY 3-12 (2001) [hereinafter COLEMAN, THE PRACTICE OF PRINCIPLE] (describing Coleman's pragmatic method);
38. JULES L. COLEMAN, RISKS AND WRONGS 6-13 (1992) (same).
39. COLEMAN, THE PRACTICE OF PRINCIPLE, supra note 19, at 5-6.
40. See HENRY M. HART, JR. & ALBERT M. SACKS, THE LEGAL PROCESS: BASIC PROBLEMS IN THE MAKING AND APPLICATION OF LAW 141-43 (William N. Eskridge, Jr. & Phillip P. Frickey eds., 1994) (distinguishing between legal policies and legal principles);
41. JOSEPH RAZ, The Functions of Law, in THE AUTHORITY OF LAW: ESSAYS ON LAW AND MORALITY 163, 166-67 (1979) (distinguishing between social functions of law and legal norms).
42. HART, supra note 11, at 35-38. I will focus on the version of the expanded-antecedent argument that Hart labels as less extreme. The less extreme version recasts rules that confer powers as fragments of laws that take the form of orders backed by threats but views facially duty-imposing rules that refer primarily to private conduct, such as the rules of criminal law, as completely stated. The more extreme version recasts even the latter kind of rules as the antecedents of orders directed at officials, requiring those officials to apply sanctions for violations of the rule. Id. at 37-38;
43. see also Hart, supra note 12, at 818-19 (describing Bentham's treatment of legal powers as fragments of larger, duty-imposing laws).
44. See generally Julian R. Kossow, Probate Law and the Uniform Probate Code: "One for the Money . . .," 61 GEO. L.J. 1357, 1394-1400 (1973) (summarizing state requirements for execution of wills);
45. John B. Rees, Jr., American Wills Statutes (pts. 1 & 2), 46 VA. L. REV. 613, 856 (1960) (comparing U.S. wills statutes).
46. U.S. CONST, art. I, § 7, cl. 2.
47. HART, supra note 11, at 36.
48. Id. at 37.
49. Hart, supra note 12, at 819.
50. HART, supra note 11, at 41.
51. As Hart later observed, The Concept of Law "attempted no close analysis either of the notion of a power or of the structure of the rules by which they were conferred, save to insist that they were different from rules which imposed obligations or duties, and to reject theories such as those of Kelsen.
52. " Hart, supra note 12, at 801.
53. HART, supra note 11, at 96.
54. JOSEPH RAZ, PRACTICAL REASON AND NORMS 102 (Princeton Univ. Press 1990) (1975). Ativan describes the same phenomenon with a different example: The courts have recently decided that a local authority which is guilty of negligence in supervising the construction of a house in accordance with the Building Regulations may be liable to an ultimate purchaser of the house. The liability is, of course, a liability in tort, Now that the liability is established as a matter of law, it would not seem unreasonable or odd to say that a local authority impliedly undertakes or promises to exercise due care in supervising the construction of houses. But it would have been difficult to argue for the existence of such an implied undertaking or promise prior to the establishment of legal liability. Here it is clear that the liability is first created on independent grounds, and the implication of a promise can then be read into the conduct which leads to liability.
55. Atiyah, supra note 6, at 205 (citations omitted).
56. See W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 109, at 760-61 (W. Page Keeton ed., 5th ed. 1984) (describing generally accepted view that defendant's holding himself out, or being understood, as having special knowledge of some matter that is not available to plaintiff is implied assertion that defendant knows facts that justify his opinion, facts on which plaintiff may reasonably rely).
57. Official Secrets Act, 1989, c. 6.
58. See RESTATEMENT (THIRD) OF TORTS: PROD. LIAB. § 2(d)(i) (1998) (stating that sellers of commercial products must provide reasonable warnings about risks of injury posed by products).
59. CAL. PENAL CODE §§ 667(e)(1)-(2)(A) (West 1999);
60. CAL. PENAL CODE §§ 1170.12(c)(1)-(2) (West 2004). The point here is about the structure of the law. The fact that penalties also attach to the first two crimes shows that it would be silly to interpret the three-strikes rule as a power-conferring one. But it does not destroy the structural parallel or render the interpretation impossible. Thus an anthropologist from a distant land might hypothesize that the legal consequences attaching to the first two acts might be a tax on or price for exercising the power.
61. The puzzle does not depend on the sanction theory of legal duties, according to which a duty is simply an order backed up by the threat of sanctions, which one might reject for other reasons. Thanks to David Owens for helping me to clarify this point.
62. See supra notes 30-35 and accompanying text.
63. RAZ, supra note 31, at 102.
64. For an excellent overview of Raz's analysis of normative powers, see Pratt, Promises, Contracts and Voluntary Obligations, supra note 5, at 539-43.
65. HART, supra note 11, at 81.
66. JOSEPH RAZ, THE CONCEPT OF A LEGAL SYSTEM: AN INTRODUCTION TO THE THEORY OF LEGAL SYSTEM 158 (1970);
67. see also KELSEN, supra note 12, at 137 ("By giving individuals the possibility of regulating their mutual relations through legal transactions, the legal order grants individuals a certain legal autonomy. It is in the law-creating function of the legal transaction that the so-called 'private autonomy' of the parties manifests itself."). While Hart never undertook a functionalist analysis of legal powers, he endorsed Raz's approach: Legal provisions of this kind guide those who exercise powers in ways strikingly different from the way in which rules imposing duties guide behavior: they are more like instructions how to bring about certain results than mandatory impositions of duty.
68. Hence power-conferring rules are distinct from duty-imposing rules in their normative function .... Hart, supra note 12, at 822 (citations omitted).
69. Joseph Raz, Intention in Interpretation, in THE AUTONOMY OF LAW: ESSAYS IN LEGAL POSITIVISM 249, 265-66 (Robert P. George ed., 1996).
70. MODERN TIMES (United Artists 1936).
71. Raz makes a similar point. Raz, supra note 15, at 81.
72. Id.;
73. see also RAZ, supra note 31, at 103.
74. A more complete account of this way of analyzing legal powers would address the concepts of Rechtsgeschäft and Willenserklärung in German law and legal theory. The drafters of the 1882 German Civil Code defined the exercise of a legal power in terms almost identical to Raz's: The juristic act [Rechtsgeschäft] ... is a private declaration of the will [Privatwillenserklärung] directed at the realization of a legal effect, an effect that follows on the authority of the legal system because it is willed. The essence of the juristic act is found in the fact that a will directed at the realization of the legal effect is confirmed, and that the legal system issues a judgment, in recognition of that will, that gives legal effect to the desired legal arrangement. 1 MOTIVE ZU DEM ENTWURFE EINES BÜRGERLICHEN GESETZBUCHES FÜR DAS DEUTSCHE REICH, 126 (Berlin & Leipzig, J. Guttentag 1888) (Ger.) (author's translation).
75. For more on the concept of Rechtsgeschäft, see James R. Maxeiner, When Are Agreements Enforceable? Giving Consideration to Professor Barnett's Consent Theory of Contract, 12 lUS GENTIUM 92, 104-05 (2006). Thanks to Eyal Zamir for suggesting this connection.
76. I believe this answers Andrew Halpin's criticism of Raz on legal powers. Halpin, supra note 12, at 143-45. Halpin's criticisms are insufficiently attentive to the fact that Raz is proposing a functionalist definition of a type of law, whereby a law qualifies as a power if it has a certain purpose. On this view, it is not an objection that a person might exercise the power inadvertently.
77. See id. at 144 (proposing such an objection). The possibility of an accidental exercise of the power does not show that the law's purpose is not to confer powers but only that it fulfills that purpose imperfectly.
78. See RESTATEMENT (THIRD) OF TORTS: LIAB. FOR PHYSICAL HARM § 1 (Proposed Final Draft No. 1, 2005) (distinguishing between two senses of intent: knowledge and purpose);
79. JACK W. MEILAND, THE NATURE OF INTENTION 7-14 (1970) (same);
80. Anthony Kenny, Intention and Purpose in Law, in ESSAYS IN LEGAL PHILOSOPHY 146, 158 (Robert S. Summers ed., Univ. of Cal. Press 1976) (1968) (same);
81. see also Raz, supra note 41, at 283 n.16 (distinguishing between intention and knowledge in his proposed minimal intent requirement for legislative acts). Where legal liability turns on the actor's awareness of the potential legal consequences of her act, speaking in terms of belief rather than knowledge avoids the circularity of saying that an actor's legal liability depends on her knowledge of that legal liability.
82. See Kenny, supra, at 151 n.1 (explaining that "knowledge" is used in his analysis of intentions "to include cognitive states of mind which fall short of strict knowledge").
83. This is why Hart's account of criminal excuses as "maximizing within the framework of coercive criminal law the efficacy of the individual's informed and considered choice in determining the future and also his power to predict that future" does not mean that the criminal law is a legal power. HART, Legal Responsibility and Excuses, supra note 15, at 46;
84. see also supra note 15.
85. For more on the difference between conventional and nonconventional speech acts, see, for example, KENT BACH & ROBERT M. HARNISH, LINGUISTIC COMMUNICATION AND SPEECH ACTS 120-34 (1979),
86. and P.F. Strawson, Intention and Convention in Speech Acts, 73 PHIL. REV. 439, 441 (1964).
87. Raz, supra note 15, at 81. Fuller described the same dynamic: "[F]orm offers a legal framework into which the party may fit his actions, or, to change the figure, it offers channels for the legally effective expression of intention."
88. Fuller, supra note 1, at 801. "Form has an obvious relationship to the principle of private autonomy. Where men make laws for themselves it is desirable that they should do so under conditions guaranteeing ... the functions of form."
89. Id. at 813-14.
90. This is not the only function of formal conditions of validity. Formalities can also be designed, for example, to provide information to third parties, to lower drafting costs, to increase certainty, to simplify subsequent inquiries into legal rights, or to put legal actors on notice of important facts. No matter what their other functions, however, formal validity conditions work to condition an act's legal effect on the actor's legal purpose.
91. See, e.g., N. Y. GEN. OBLIG. LAW § 5-1501(1) (McKinney 2001) (requiring that power of attorney contain cautionary language).
92. STANDING RULES OF THE SENATE, S. Doc. No. 110-9, Rule III, at 3 (2007) (requirements of oaths);
93. id. Rule IV, at 3-4 (rules concerning Journal);
94. id. Rule XII, at 8 (rules governing voting procedure);
95. id. Rule XIV(2), at 9 (three-reading requirement).
96. See A.W.B. SIMPSON, A HISTORY OF THE COMMON LAW OF CONTRACT: THE RISE OF THE ACTION OF ASSUMPSIT 22-25 (1987) (describing specialty requirement for writ of covenant). The writ of covenant was only one method of enforcing an agreement. A claim for a specific sum of money, for example, lay instead under the writ of debt. My use of the seal as an example is not meant to be a historical claim about its actual purposes or uses. Simpson, for example, suggests that, at least in the fifteenth century, the seal was not dispositive but purely evidentiary, and that the writ of covenant might have lain in its absence.
97. Id. at 16-17.
98. But see Fuller, supra note 1, at 802 (describing seal as near-perfect formality). Another pertinent example is the Roman stipulatio, which held that some enforceable promises required a question prefaced by "Spondes-ne . . ." and the formal reply, "Spondeo."
99. See W.W. BUCKLAND, A MANUAL OF ROMAN PRIVATE LAW 262-65 (2d ed. 1939) (describing Roman rule). Peter Tiersma explains the stipulatio along these lines (though he maintains that the use of formality is additionally explained by Roman law's status-based conception of contractual obligations): What the ritualistic language does, therefore, is to set this dialogue apart from the ordinary, where any words with the meaning 'promise' would suffice. This guarantees that the parties unambiguously realize that they are engaging in something special-a binding transaction. It is virtually impossible that someone could go through this ritual without intending to bind himself.
100. Peter Meijes Tiersma, Rites of Passage: Legal Ritual in Roman Law and Anthropological Analogues, 9 J. LEGAL HIST. 3, 17-18 (1988).
101. For fascinating compendia of different types of legal ceremonies, see Bernard J. Hibbitts, "Coming to Our Senses": Communication and Legal Expression in Performance Cultures, 41 EMORY L.J. 873, 888-941 (1992),
102. and Tiersma, supra, at 3-9.
103. A common argument for the repeal of seal requirements in the early twentieth century was that the replacement of the impressed wax with the notation "L.S." had eroded this cautionary function. See, e.g., Eric Mills Holmes, Stature and Status of Promise Under Seal as a Legal Formality, 29 WILLAMETTE L. REV. 617, 635-37 (1993) (arguing that with "relaxation of form, the significance of the seal has substantially declined," to point at which it can no longer fulfill function of legal formality).
104. See supra text accompanying note 41.
105. Waller v. Brown, 149 S.E. 687, 688 (N.C. 1929);
106. see also, e.g., Horton v. Murden, 43 S.E. 786, 787 (Ga. 1903) ("There must always appear on the face of the instrument enough to indicate an intention to convey an interest in the property described. But while proper words are necessary, 'grant,' 'bargain,' 'sell,' and other technical expressions need not be used.");
107. Shadden v. Zimmerlee, 81 N.E.2d 477, 479 (111. 1948) ("No particular form of words is necessary, but it must appear from the language employed that it was the intention to convey the title and the language must purport to have that effect.");
108. Lim v. Choi, 501 S.E.2d 141, 143-44 (Va. 1998) ("A writing need not be in any particular form to constitute a deed. Nonetheless, a document purporting to convey title must contain operative words manifesting an intent to transfer the property."). While courts often equate the use of words that purport to perform the legal act (which are translatable into a sentence of the form "I hereby ...") with the expression of an intention to perform the act in question, these are speech acts with different meanings.
109. See Pope v. Burgess, 53 S.E.2d 159, 160-61 (N.C. 1949) ("The language used in the instrument under review, while sufficiently pointed as to the description of the property, and while the instrument itself is referred to as a conveyance, does no more than to state the intention of the parties respectively that the survivor should have the property described without using any words or language which might, under the most liberal construction by the Court, be regarded as transferring a present interest.");
110. see also infra note 82.
111. Legal Effectiveness of a Presidential Directive, as Compared to an Executive Order, Op. Off. Legal Counsel (Jan. 29, 2000), http://www.usdoj.gov/ olc/predirective.htm.
112. Presumably, it is necessary that this be the literal and direct meaning of the act and not, for example, a metaphorical or whimperative one. See BACH & HARNISH, supra note 48, at 60-76 (outlining characteristics of literal versus nonliteral illocutionary acts within speech act schema).
113. In the idiom of speech-act theory, illocutionary intent-the intent to perform a speech act with a certain meaning-is strongly correlated with perlocutionary intent-the intent to achieve a certain result. See Peter Meijes Tiersma, The Language of Offer and Acceptance: Speech Acts and the Question of Intent, 74 CAL. L. REV. 189, 226-29 (1986) (describing relationship between illocutionary intent to perform speech act of offering and various perlocutionary intentions, such as intent to create certain impression in offeree or intent to perform act in question). A more detailed account of the connection between nonconventional legal speech acts and the speaker's legal purpose would involve a tour through late-twentieth-century speech-act theory.
114. Important sources here would include BACH & HARNISH, supra note 48, at 12-18,
115. JOHN R. SEARLE, SPEECH ACTS: AN ESSAY IN THE PHILOSOPHY OF LANGUAGE 42-50, 54-71 (1969),
116. H.P. Grice, Meaning, 66 PHIL. REV. 377 (1957),
117. reprinted in PAUL GRICE, STUDIES IN THE WAY OF WORDS 213 (1989),
118. and Strawson, supra note 48.
119. This is how Peter Tiersma analyzes the speech acts of offer and acceptance. Tiersma, supra note 59, at 198-206;
120. see also Tiersma, supra note 53, at 18-19 (suggesting that ritualistic language in contract law has been supplanted by equivalent nonritualistic expressions). While Tiersma's careful analysis nicely captures what a perlocutionary act of contracting looks like, he does not have an argument that the law requires such an act for the formation of a contract.
121. See Barbara Fried, Is as Ought: The Case of Contracts, 92 VA. L. REV. 1375, 1379 (2006) (noting absence of promissory acts in formation of many contractually binding agreements);
122. Robert Samek, Performative Utterances and the Concept of Contract, 43 AUSTRALASIAN J. PHIL. 196, 203-07 (1965) (distinguishing between promises and various senses of "agreement").
123. Karl Llewellyn was the most influential proponent of this view of contract formation. See U.C.C. § 1-201(3) (1951) ("'Agreed' or 'Agreement' means the bargain in fact as found in the language of the parties or in course of dealing or usage of trade or course of performance or by implication from other circumstances.");
124. id. § 2-204(2) ("Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale even though the moment of its making cannot be determined.");
125. K.N. Llewellyn, Our Case-Law of Contract: Offer and Acceptance, II (pt. 3), 48 YALE L.J. 779 (1939) (discussing his theory of business contracts).
126. See, e.g., Benton v. Stadler, 234 N.W. 739, 740 (Wis. 1931) (holding father liable for medical services performed on his daughter at his request).
127. RESTATEMENT (SECOND) OF CONTRACTS § 62 (1981).
128. U.C.C § 2-204, Purposes of Changes (2004);
129. see id. § 2-204(1) ("A contract for sale of goods may be made in any manner sufficient to show agreement....");
130. id. § 2-207(3) ("Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.");
131. RESTATEMENT (SECOND) OF CONTRACTS § 19 (1981) ("The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.").
132. U.C.C. § 1-205(3) (2004).
133. Id. § 2-208(3).
134. For a more detailed description of these aspects of the Uniform Commercial Code, including the difficulty in contracting around them, see Lisa Bernstein, Merchant Law in a Merchant Court: Rethinking the Code's Search for Immanent Business Norms, 144 U. PA. L. REV. 1765, 1782-87 (1996).
135. One way of putting this point is that not every agreement, and therefore not every contract, involves a promise, where "promise" means an explicit undertaking of an obligation. I discuss this idea further in Part IV.B, where I describe the differences between promises and Raz's concept of voluntary obligations. See infra notes 147-51 and accompanying text. Both Michael Pratt and Aditi Bagchi have recently argued that not all contracts are promises, but for a very different reason.
136. Pratt, Contract: Not Promise, supra note 5;
137. Aditi Bagchi, Contract v. Promise (Univ. of Pa. Law Sch., Pub. Law & Legal Theory Research Paper Series, Paper No. 07-35, 2007), available at http://ssrn.com/abstract=1012150. Pratt and Bagchi both observe that it is possible to exercise the legal power to contract without at the same time incurring a moral obligation to perform. While I agree that some contracts do not come with promissory or other extralegal obligations to perform, my point here is that one can also incur a moral obligation to perform, to which a legal obligation attaches, without making a promise.
138. For a different argument that contract law enforces nonpromissory extralegal obligations, see generally Anne De Moor, Are Contracts Promises?, in OXFORD ESSAYS IN JURISPRUDENCE 103 (John Eekelaar & John Bell eds., 3d ser. 1987).
139. Raz, supra note 41, at 266. Hart adopts a similar position when describing Bentham on legal powers: "In entering into such legal transactions [a person] does an act (usually the writing or saying of certain words according to more or less strictly prescribed forms) which manifest certain intentions as to future rights and duties of himself and others.
140. " Hart, Bentham on Legal Rights, supra note 15, at 179. Both Hart's and Raz's descriptions of legislative acts are influenced by Austin and Strawson's work on performatives.
141. See Hart, supra note 12, at 820 (discussing relevance of speech-act theory to analysis of legal powers). One might argue that, as a historical matter, the analysis of legal powers has been impeded by speech-act theory, which has concentrated attention on the way that special speech acts figure into the exercise of legal powers at the expense of other ways in which they can be exercised.
142. See, e.g., N.Y. GEN. OBUG. LAW § 5-1501 (McKinney 2001) (stipulating form to be used to create power of attorney);
143. N.Y. EST. POWERS & TRUSTS LAW § 3-2.1 (McKinney 1998) (specifying formal requirements to execute will);
144. see also supra note 56 (detailing case law on requirements to create deed).
145. GUENTER TREITEL, THE LAW OF CONTRACT 149 (10th ed. 1999);
146. see also M.P. FURMSTON, CHESHIRE, FIFOOT AND FURMSTON'S LAW OF CONTRACT 121-31 (14th ed. 2001) (discussing circumstances in which contract is denied on ground that there is no intention to create legal liability).
147. The leading English case for the principle is Balfour v. Balfour, [1919] 2 K.B. 571.
148. It bears mentioning that most civil law countries have something like the English rule on their books. Thus the Commission on European Contract Law's Principles of European Contract Law state: "In order to be bound by a contract a party must have an intention to be legally bound. Whether in fact it has such intention is immaterial if the other party has reason to infer from the first party's statement or other conduct that it intends to be bound ...." PRINCIPLES OF EUROPEAN CONTRACT LAW Art. 2:101 cmt. B (Comm. on European Contract Law, Ole Lando & Hugh Beale eds., 2000).
149. See generally id. arts. 2:101-:102 and accompanying notes (discussing European sources of law). While the practical effect of such rules would be an interesting avenue for further research, I hesitate to draw quick conclusions about such different legal traditions. The French Civil Code, for example, states that "[agreements lawfully entered into take the place of the law for those who have made them." CODE CIVIL art. 1134 (Fr.).
150. While this might look something like the power-conferring picture of contract law, James Gordley argues that the provision in fact reflects the influence of the natural law tradition on the French Civil Code. JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE 217-19 (1991). If he is correct, "law" in article 1134 is better understood as referring to the moral law that contract law enforces.
151. TREITEL, supra note 70, at 158.
152. See id. at 151-59 (describing contextual factors and evidentiary presumptions affecting likelihood of court finding intent to be legally bound).
153. I know of no opinion directly addressing whether "intent" in the English rule refers to belief or purpose. But in Ford Motor Co. v. Amalgamated Union of Engineering Foundry Workers, the court based its finding-that the parties to a collective bargaining agreement did not intend to be bound-solely on evidence of their reasonable expectations, given the state of the law and legal scholarship on the question. [1969] 2 Q.B. 303.
154. See Barnett, Consent Theory, supra note 5, at 300-09 (arguing that, since it is based on notions of entitlements, consent theory of contract looks to objective rather than subjective manifestations of intent);
155. Barnett, Sound of Silence, supra note 5, at 855-59 (discussing problems with relying on subjective intent and resulting need to rely on objective appearances).
156. TREITEL, supra note 70, at 150.
157. See Stephen Hedley, Keeping Contract in Its Place-Balfour v Balfour and the Enforceability of Informal Agreements, 5 OXFORD J. LEGAL STUD. 391, 393-97 (1985) (critically discussing judicial experience with English rule).
158. Atiyah concludes that it is "more realistic to say that no positive intention to enter into legal relations needs to be shown, and that 'a deliberate promise seriously made is enforced irrespective of the promisor's views regarding his legal liability.' " P.S. ATIYAH, AN INTRODUCTION TO THE LAW OF CONTRACT 153 (5th ed. 1995)
159. (quoting 1 SAMUEL WILUSTON, A TREATISE ON THE LAW OF CONTRACTS 39 (3d ed. 1957)).
160. Hedley, supra note 76, at 394-95.
161. See ATIYAH, supra note 76, at 154-55 (describing presumption that business or commercial dealings are intended to have legal effect);
162. TREITEL, supra note 70, at 157-58 (describing presumption in favor of finding contract where claim is based on proved or admitted express agreement).
163. See President of the Methodist Conference v. Parfitt, [1984] 1 Q.B. 368 (holding that clerical employment agreements are not contracts);
164. Ford Motor Co. v. Amalgamated Union of Eng'g Foundry Workers, [1969] 2 Q.B. 303 (holding that collective bargaining agreement did not give rise to contractual liability);
165. Balfour v. Balfour, [1919] 2 K.B. 571 (holding that agreement between spouses was not contract);
166. see also Cohen v. Cowles Media Co., 457 N.W.2d 199, 203 (Minn. 1990), rev'd on other grounds, 501 U.S. 663 (1991) (holding that reporter's confidentiality promise did not create contract because source and reporter ordinarily do not believe they are making legally binding contract).
167. See, e.g., Hedley, supra note 76, passim;
168. B.A. Hepple, Intention To Create Legal Relations, 28 CAMBRIDGE L.J. 122, 134-37 (1970);
169. Mary Keyes & Kylie Burns, Contract and the Family: Whither Intention?, 26 MELB. U. L. REV. 577 (2002).
170. MODEL WRITTEN OBLIGATIONS ACT § 1, in HANDBOOK OF THE NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS AND PROCEEDINGS OF THE THIRTY-FIFTH ANNUAL MEETING 584 (1925) (emphasis added).
171. Unlike, for example, the rule for deeds, the Act does not require the speaker to engage in a specifically legal speech act, that is, an act that can be translated into "I hereby . . . ," where the ellipsis is replaced by a verb phrase describing the exercise of a legal power. Enforcement turns not on the performance of a legal speech act but on the right sort of evidence of legal intent.
172. 33 PA. CONS. STAT. ANN. § 6 (West 1997 & Supp. 2008).
173. Utah enacted the Act but then later repealed it. E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS 80-81 (1998);
174. Joseph Siprut, Comment, The Peppercorn Reconsidered: Why a Promise To Sell Blackacre for Nominal Consideration Is Not Binding, But Should Be, 97 NW. U. L. REV. 1809, 1813-14 (2003).
175. RESTATEMENT (SECOND) OF CONTRACTS § 21 (1981);
176. see also 1 ARTHUR LINTON CORBIN, CORBIN ON CONTRACTS § 2.13 (rev. ed. 1993) (describing U.S. rule on parties' intent to be legally bound);
177. E. ALLAN FARNSWORTH, FARNSWORTH ON CONTRACTS § 3.7 (3d ed. 2004) (same);
178. SAMUEL WILLISTON & RICHARD A. LORD, A TREATISE ON THE LAW OF CONTRACTS §3:5 (4th ed. 2007) [hereinafter WILLISTON] (same). Several U.S. jurisdictions regularly list an intent to be legally bound among the elements of a valid contract.
179. See, e.g., Wyatt v. Wyatt, 65 P.3d 825, 828 (Alaska 2003);
180. Duffy v. Duffy, 881 A.2d 630, 634 (D.C. 2005);
181. R.I. Five v. Med. Assoes, of Bristol County, Inc., 668 A.2d 1250, 1253 (R.I. 1996). I have been unable to locate any cases in these jurisdictions, however, in which the question of contractual liability turned on an inquiry into the parties' intent to contract. The general rule that evidence of an intention to be legally bound is not essential to the formation of a contract is, however, subject to exceptions for certain types of agreements.
182. See infra notes 108-10 and accompanying text.
183. RESTATEMENT (SECOND) OF CONTRACTS § 21 (1981).
184. See id. §§ 195(2)-(3) (describing when agreement exempting party from liability for negligence is enforceable).
185. Id. § 21 cmt. b, illus. 2.
186. 1 ARTHUR LINTON CORBIN, CORBIN ON CONTRACTS § 34, at 135 (1st ed. 1950).
187. Teachers Ins. & Annuity Ass'n of Am. v. Tribune Co., 670 F. Supp. 491, 499 (S.D.N.Y. 1987);
188. see also U.C.C. § 2-204(3) (2004) ("Even though one or more terms are left open[,] a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.");
189. RESTATEMENT (SECOND) OF CONTRACTS § 33 cmt. a (1981) (noting that when some terms are left open or uncertain, if "the actions of the parties ... show conclusively that they have intended to conclude a binding agreement,... courts endeavor, if possible, to attach a sufficiently definite meaning to the bargain");
190. id. § 27 (discussing oral agreements contemplating written memorial). The rule for ratifications of otherwise voidable agreements also suggests a test for contractual intent.
191. See Sprecher v. Sprecher, 110 A.2d 509, 512 (Md. 1955) (finding mere acquiescence or inaction insufficient to establish ratification);
192. WILLISTON, supra note 84, § 9:17, at 144-45 ("Ignorance of the party ratifying that his infancy gives him a legal defense is generally held to be immaterial, though there are cases to the contrary."). And the 2003 amendments to the Uniform Commercial Code would introduce contractual intent into the test for an enforceable click-through agreement. U.C.C. § 2-204 cmt. 5 (2004) ("When the requisite intent to enter into a contract exists, subsection (4)(b) validates contracts formed by an individual and an electronic agent.").
193. Of these rules, only that for preliminary agreements has received sustained scholarly attention. Allan Farnsworth concludes: "It would be difficult to find a less predictable area of contract law." E. Allan Farnsworth, Precontractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations, 87 COLUM. L. REV. 217, 259-60 (1987);
194. see also Alan Schwartz & Robert E. Scott, Precontractual Liability and Preliminary Agreements, 120 HARV. L. REV. 661, 675-76 (2007) (concluding that rule for preliminary agreements "provides too little normative guidance").
195. The Restatement rule can be traced back to section 21 of Williston's treatise. Williston suggests a number of arguments for the rule, including that where courts impose such a requirement, "the intent is frequently fictitiously assumed." 1 SAMUEL WILLISTON, THE LAW OF CONTRACTS § 21, at 23 (1st ed. 1920).
196. RESTATEMENT (SECOND) OF CONTRACTS § 71 (1981);
197. see also Fuller, supra note 1, at 799 n.2 (citing sources that explain consideration as means of ensuring promise was not made impulsively and without proper deliberation).
198. Randy E. Barnett, Some Problems with Contract as Promise, 77 CORNELL L. REV. 1022, 1029 (1992). Barnett explains the idea at greater length in an earlier work: The fact that a person has received something of value in return for a "promise" may indeed indicate that this promise was an expression of intention to transfer rights. Moreover, in some circumstances where gratuitous transfers are unusual, the receipt of a benefit in return for a promise should serve as objective notice to the promisor that the promise has been interpreted by the other party to be legally binding.
199. Barnett, Consent Theory, supra note 5, at 313. This interpretation of the consideration requirement can be traced back to Lord Mansfield and is not uncommon in sources supporting the English rule.
200. See LAW REVISION COMM., STATUTE OF FRAUDS AND THE DOCTRINE OF CONSIDERATION 14 (6th Interim Report, 1937) (describing influence of Mansfield's view on evolution of English doctrine of consideration).
201. Fuller, supra note 1, at 815.
202. Id. at 800.
203. Id. at 801
204. (quoting 2 RUDOLPH VON JHERING, GEIST DES ROMISCHEN RECHTS 494 (8th ed. 1923)).
205. Id. at 799.
206. Daniel Markovits, Contract and Collaboration, 113 YALE L.J. 1417, 1481-91 (2004).
207. Melvin A. Eisenberg, The Principles of Consideration, 67 CORNELL L. REV. 640, 659-62 (1982). Alternatively, one might argue that the consideration requirement is simply a historical accident and without justification.
208. See, e.g., LAW REVISION COMM., supra note 93, at 12-17 (describing history of consideration requirement and arguing that by 1937, it had degenerated into mere technicality that did more harm than good).
209. RESTATEMENT (SECOND) OF CONTRACTS § 79 cmt. d (1981).
210. See supra notes 81-82 and accompanying text.
211. For a detailed analysis of the different reasons for wanting to legally commit oneself in advance to an agreement, see Richard Craswell, Offer, Acceptance, and Efficient Reliance, 48 STAN. L. REV. 481, 487-501 (1996).
212. For a less technical version of the same idea, see DORI KIMEL, FROM PROMISE TO CONTRACT: TOWARD A LIBERAL THEORY OF CONTRACT 57-65 (2003).
213. For example, at the time of formation, a promisor who intends to perform wants a credible means of sharing that (and other value-creating) information with the promisee. The law of fraud gives her such a means by backing up her representation of intent with punitive damages should it be false. IAN AYRES & GREGORY KLASS, INSINCERE PROMISES: THE LAW OF MISREPRESENTED INTENT 59-82 (2005). After formation, many contracts include duties to share information about a party's performance or breach. Because legal remedies for the breach of such duties make a practical difference only when they are extracompensatory, we can predict that many parties who agree to such clauses will expect and want liability in fraud, which provides such remedies when the required representations are false.
214. Gregory Klass, Contracting for Cooperation in Recovery, 117 YALE L.J. 2 (2007).
215. This, of course, assumes that the other elements of fraud are satisfied.
216. Or, more traditionally, fraus omnia corrumpit. See ABRY Partners V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032, 1059, 1061, 1064 (Del. Ch. 2006) (refusing to enforce clause limiting liability for fraud);
217. RESTATEMENT (SECOND) OF CONTRACTS § 196 (1981) ("A term unreasonably exempting a party from the legal consequences of a misrepresentation is unenforceable on grounds of public policy."). Sophisticated parties who want to limit recovery for misrepresentations must instead use a "no reliance" clause, which in effect states that a necessary element of a fraud claim-the reliance of the injured party on the purported misrepresentation-has not been satisfied. Courts reason that where such a clause exists, permitting a claim of fraud would enable a different fraud, based on the plaintiff's false statement that she did not rely.
218. ABRY Partners V, L.P., 891 A.2d at 1058;
219. see also Kronenberg v. Katz, 872 A.2d 568, 593 (Del. Ch. 2004) (finding no liability in fraud based on no-reliance clause). Aside from their opacity (nonsophisticated parties might not understand that the true purpose is to avoid fraud liability), such clauses give the parties only limited control over their legal exposure. They cannot, for example, cap or otherwise limit damages for misrepresentations but must opt out of them entirely.
220. See Klass, supra note 103, at 45-49 (discussing application of economic loss rule to bar liability for fraud for acts that are not considered to be independent from acts that breached contract). The rule is commonly justified on the grounds that fraud liability would interfere with the parties' chosen allocation of risk, reasoning that assumes that the law of fraud is not an appropriate tool for purposively allocating risk.
221. Id. at 47-48 (citing sources that make allocation-of-risk argument). Courts have not indicated a method by which parties might opt into liability for fraud in the performance. That is, to date, the prohibition on liability for fraud in the performance appears to be a mandatory rule that applies regardless of the parties' wishes.
222. According to the Restatement, "[w]hether a statement is false depends on the meaning of the words in all the circumstances, including what may fairly be inferred from them. An assertion may also be inferred from conduct other than words." RESTATEMENT (SECOND) OF CONTRACTS § 159 cmt. a (1981);
223. see also KEETON ET AL., supra note 32, § 106, at 736 ("The significance to be assigned to such words or conduct will be determined according to the effect they would produce, under the circumstances, upon the ordinary mind."). There are good reasons not to adopt fixed legal interpretations in fraud, most notably that such rules tend to provide safe harbors for fraudsters to exploit.
224. See AYRES & KLASS, supra note 103, at 105 (noting that fixed rules provide safe harbors that protect fraud from legal scrutiny);
225. Samuel W. Buell, Novel Criminal Fraud, 81 N.Y.U. L. REV. 1971, 1988-92 (2006) (drawing on legal history to argue that fraud has long had "a chameleon-like quality").
226. See, e.g., U.C.C. § 2-718 (2004) (describing rule for liquidated damages);
227. id. § 2-719 (describing rule for damage caps and limits on consequential damages);
228. RESTATEMENT (SECOND) OF CONTRACTS § 356 (1981) (describing rule for liquidated damages);
229. WILLISTON, supra note 84, § 64:17 (describing rule for damage caps and limits on consequential damages);
230. id. § 65:1 (describing rule for liquidated damages).
231. RESTATEMENT (SECOND) OF CONTRACTS § 21 (1981) ("[A] manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.").
232. See id. § 95(1) (providing that promise under seal is binding without consideration);
233. Holmes, supra note 54, at 644-47, 656-63 (describing statutes reducing effect of seal to presumption of consideration and statutes of limitations for sealed instruments).
234. RESTATEMENT (SECOND) OF CONTRACTS § 356(1) (1981).
235. Id. § 21 cmt. b;
236. see also Wendell H. Holmes, The Freedom Not To Contract, 60 TUL. L. REV. 751, 780-86 (1986) (describing cases in which TINALEA clauses are not enforced).
237. RESTATEMENT (SECOND) OF CONTRACTS § 202 (1981).
238. Id. §§ 209-218.
239. See Craswell, supra note 102, at 551-53 (describing how legal formalities function in contract interpretation).
240. U.C.C. §§ 2-316(2)-(3)(a) (2004).
241. RESTATEMENT (SECOND) OF CONTRACTS § 211(2) (1981) ("Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.").
242. For a remarkable historical example of this rule at work in the insurance industry, see James Oldham, Insurance Litigation Involving the Zong and Other British Slave Ships, 1780-1807, 28 J. LEGAL HIST. 299, 300-03 (2007).
243. See also generally Michelle E. Boardman, Contra Proferentem- The Allure of Ambiguous Boilerplate, 104 MICH. L. REV. 1105 (2006) (discussing how processes of drafting and judicial interpretation of boilerplate leads to use and retention of unclear language).
244. See Pac. Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 442 P.2d 641, 645-46 (CaI. 1968) (holding that court may consider extrinsic evidence in deterrnining whether term is ambiguous);
245. RESTATEMENT (SECOND) OF CONTRACTS§ 209 (1981) (describing rule for deterrnining when agreement is integrated);
246. id § 212 (describing rule for use of extrinsic evidence in interpreting ambiguous terms).
247. See generally Eric A. Posner, The Parol Evidence Rule, the Plain Meaning Rule, and the Principles of Contractual Interpretation, 146 U. PA. L. REV. 533 (1998) (describing different versions of parol evidence rule).
248. U.C.C. § 2-316(3)(a) (2004).
249. RESTATEMENT (SECOND) OF CONTRACTS § 211(2) (1981).
250. See id. § 110 (listing types of contracts commonly covered by statutes of frauds).
251. See, e.g., Karl N. Llewellyn, What Price Contract? - An Essay in Perspective, 40 YALE L.J. 704, 747 (1931);
252. Morris G. Shanker, In Defense of the Sales Statute of Frauds and Parole [sic] Evidence Rule: A Fair Price of Admission to the Courts, 100 COM. L.J. 259, 273-76 (1995);
253. L. Void, The Application of the Statute of Frauds Under the Uniform Sales Act, 15 MINN. L. REV. 391, 393-95 (1931).
254. Richard Craswell, Property Rules and Liability Rules in Unconscionability and Related Doctrines, 60 U. CHI. L. REV. 1, 7 (1993).
255. Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 YALE L.J. 87, 95-97 (1989). Ayres and Gertner argue that no enforcement is a preferred penalty generally: "When the rationale is to provide information to the courts, the non-enforcement default is likely to be efficient. Non-enforcement defaults are likely to provide least-cost deterrence because they are inexpensive to enforce and give each party incentives to contract around the rule."
256. Id. at 98. Again, the argument is premised on parties expecting and wanting legal liability.
257. RESTATEMENT (SECOND) OF CONTRACTS § 206 (1981);
258. see, e.g., 2 FARNSWORTH, supra note 84, § 7.11, at 303;
259. Omri Ben-Shahar, "Agreeing To Disagree": Filling in Gaps in Deliberately Incomplete Contracts, 2004 Wis. L. REV. 389, 391;
260. Henry E. Smith, Modularity in Contracts: Boilerplate and Information Flow, 104 MICH. L. REV. 1175, 1202 (2006).
261. This premise is akin to what Jody Kraus describes as the "ex ante" perspective of much economic analysis. Jody S. Kraus, Philosophy of Contract Law, in THE OXFORD HANDBOOK OF JURISPRUDENCE AND PHILOSOPHY OF LAW 687, 701 (Jules Coleman & Scott Shapiro eds., 2002). While this methodological assumption is common among economic accounts of the law, it is by no means essential to them. Rather than providing incentives to behave efficiently, the law might promote efficient behavior through natural selection. By imposing additional liability on socially inefficient repeat players in competitive markets, the law can, in the long run, help weed them out, regardless of whether the players anticipate legal liability at any time during the transaction. I owe this point to conversations with Kathy Zeiler.
262. While the earliest economic analyses of contract law focused on the postformation reliance and breach decisions, theorists soon turned their attention to how the law affects incentives before and during formation. See Richard Craswell, Contract Remedies, Renegotiation, and the Theory of Efficient Breach, 61 S. CAL. L. REV. 629 (1988) (describing incentive effects of remedial rules across various stages of transaction).
263. See, e.g., RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 167-247 (6th ed. 2003) (discussing criminal and tort law).
264. See Gilbert H. Harman, The Inference to the Best Explanation, 14 PHIL. REV. 88 (1965) (arguing that "inference to the best explanation" is basic form of nondeductive inference).
265. See, e.g., 2 FARNSWORTH, supra note 84, § 6.1, at 105 ("[The Statute of Fraud's] original purpose was evidentiary, providing some proof that the alleged agreement was actually made.");
266. WILLISTON, supra note 84, § 21:1, at 171 ("The Statute of Frauds was designed to prevent the enforcement of unfounded fraudulent claims.").
267. See supra Part I.A.
268. HART, supra note 11, at 81.
269. RAZ, supra note 40, at 158.
270. See, e.g., KIMEL, supra note 102;
271. STEPHEN A. SMITH, CONTRACT THEORY (2004);
272. Peter Benson, The Unity of Contract Law, in THE THEORY OF CONTRACT LAW: NEW ESSAYS 118, 123-24 (Peter Benson ed., 2001);
273. Bridgeman, supra note 5;
274. Jody S. Kraus, Reconciling Autonomy and Efficiency in Contract Law: The Vertical Integration Strategy, 11 PHIL. ISSUES 420 (2001);
275. Markovits, supra note 98;
276. T.M. Scanlon, Promises and Contracts, in THE THEORY OF CONTRACT LAW, supra, at 86;
277. Seana Valentine Shiffrin, The Divergence of Contract and Promise, 120 HARV. L. REV. 708 (2007);
278. Weinrib, supra note 5.
279. FRIED, supra note 2, at 17, 132;
280. Atiyah, supra note 6;
281. see also supra notes 6-7 and accompanying text.
282. See supra note 5 and accompanying text.
283. KIMEL, supra note 102, at 136-40.
284. Not every pluralist theory claims that contract law should serve both a power-conferring and a duty-imposing function. Jody Kraus and Nathan Oman, for example, each recommend a theory of contract law that integrates autonomy and efficiency-two principles that, on their face, appear to recommend a power-conferring picture of contract. See generally Kraus, supra note 9;
285. Kraus, supra note 134;
286. Nathan Oman, Unity and Pluralism in Contract Law, 103 MICH. L. REV. 1483, 1498-1506 (2005). As I noted in the Introduction, my focus here is on general theories of contract. One can also find pluralist theories of individual rules.
287. Kevin Davis, for example, argues for "a rule of enforceability [for disclaimers of fraud liability] which often, though not always, reconciles principles of respect for individual autonomy, morality and efficiency." Kevin Davis, Licensing Lies: Merger Clauses, the Parol Evidence Rule and Precontractual Misrepresentations, 33 VAL. U. L. REV. 485, 487 (1999).
288. Similarly, Eyal Zamir argues that the restoration remedy "is justified by-or at least compatible with-various normative theories," including the will theory, corrective justice, distributive justice, economic efficiency, and contract as cooperation. Eyal Zamir, The Missing Interest: Restoration of the Contractual Equivalence, 93 VA. L. REV. 59, 103-36 (2007).
289. Fuller, supra note 1, at 806-13.
290. Scanlon, supra note 134, at 99-111.
291. Other pluralist theories of the normative grounds of contract law that might be compatible with the compound picture include MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993),
292. Peter A. Alces, Unintelligent Design in Contract, 2008 U. III. L. REV. 505,
293. and Melvin A. Eisenberg, The Theory of Contracts, in THE THEORY OF CONTRACT LAW, supra note 134, at 206, 240-64.
294. Kraus, supra note 126, at 688 n.1.
295. For a description of two sorts of ordering principles that might be applied to contract theory, see Kraus, supra note 134, at 422-27.
296. See, e.g., Brian H. Bix, Contract Rights and Remedies, and the Divergence Between Law and Morality, 21 RATIO JURIS 194, 195 n.2 (2008) (citing examples of scholarship that make such claim);
297. Markovits, supra note 98, at 1464-73 (distinguishing moral obligations created by contracts with individuals from those created by contracts with corporations or other nonnatural entities);
298. Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract, 113 YALE L.J. 541, 543-45 (2003) (offering normative theory of contracts between sophisticated business actors).
299. Barbara Fried has some very helpful thoughts on the extent to which contract theory should consider itself beholden to the "hodge-podge of often inconsistent intuitions, drawn from [a variety of] normative principles" that stand behind contract law. Fried, supra note 61, at 1385-89. Melvin Eisenberg makes a similar point: Part of the human moral condition is that we hold many proper values, some of which will conflict in given cases, and part of the human social condition is that many values are relevant to the creation of a good world, some of which will conflict in given cases.
300. Contract law cannot escape these moral and social conditions. Eisenberg, supra note 141, at 240-41.
301. The most pertinent texts are Joseph Raz, Promises and Obligations, in LAW, MORALITY, AND SOCIETY: ESSAYS IN HONOUR OF H.L.A. HART 210 (P.M.S. Hacker & J. Raz eds., 1977)
302. [hereinafter Raz, Promises and Obligations],
303. Joseph Raz, Promises in Morality and Law, 95 HARV. L. REV. 916 (1982)
304. [hereinafter Raz, Promises in Morality and Law]
305. (reviewing P.S. ATIYAH, PROMISES, MORALS, AND LAW (1981)),
306. and Raz's Voluntary Obligations and Normative Powers, supra note 15.
307. See, e.g., KIMEL, supra note 102, at 27-29, 90;
308. Markovits, supra note 98, at 1440-41, 1511-12;
309. Pratt, Promises, Contracts and Voluntary Obligations, supra note 5;
310. Hanoch Sheinman, Contractual Liability and Voluntary Undertakings, 20 OXFORD J. LEGAL STUD. 205, 208 & n.7, 211 & n.11 (2000);
311. Smith, supra note 7, at 367-69 (1997).
312. Raz, Promises in Morality and Law, supra note 145, at 929.
313. Id. at 929, 930. It is worth noting Raz's observation that many of these obligations do not rest on a promise: "[N]ot all voluntary obligations are promises. But whatever reason there is for the law to protect the promising practice requires it to protect the wider practice of undertaking voluntary obligations of any kind."
314. Id. at 936.
315. My analysis of the concept of voluntary obligations is similar to Penner's analysis in J.E. Penner, Voluntary Obligations and the Scope of the Law of Contract, 2 LEGAL THEORY 325, 326-40 (1996). Penner's article deserves more attention from contract theorists than it has so far received and more extended discussion than I will give it here.
316. While I am sympathetic to Penner's distinction between promises and agreements, which characterizes promises as unilateral and agreements as bilateral, id. at 328-30, I would add that not all agreements, or the associated voluntary obligations, result from the exercise of normative powers.
317. Michael Bratman makes the point about agreements without promises in MICHAEL E. BRATMAN, Shared Intention, in FACES OF INTENTION: SELECTED ESSAYS ON INTENTION AND AGENCY 109, 125-29 (1999). Whether or when the shared projects Bratman describes also involve voluntary obligations-not as preconditions but as ordinary consequences-is a question that, to my knowledge, the philosophical literature has yet to address.
318. RAZ, supra note 31, at 102.
319. My reading of Raz on voluntary obligations differs from Hanoch Sheinman's. For Sheinman, a voluntary obligation arises when there is an "intention not simply to do the act, but to do it in order to incur an obligation," and "the act of a voluntary undertaking is not complete unless it includes a successful representation of the same intention." Sheinman, supra note 146, at 211. Where Sheinman sees purpose, I see mere knowledge as sufficient.
320. Raz, Promises and Obligations, supra note 145, at 218. Raz expresses the same point in slightly different language: "[T]he only belief that the promisor need always intend to induce or be taken to have the intention of inducing is the belief that he (the promisor) intends to undertake an obligation and to confer a right on the promisee."
321. Raz, supra note 15, at 100.
322. For arguments that promising is not a normative power in Raz's narrow sense, see Markovits, supra note 98, at 1442-46,
323. and Pratt, Promises, Contracts and Voluntary Obligations, supra note 5.
324. JOSEPH RAZ, The Institutional Nature of Law, in THE AUTHORITY OF LAW, supra note 21, at 119.
325. Raz, supra note 15, at 87.
326. For various versions of this distinction, see RAZ, supra note 152, at 120,
327. RAZ, supra note 31, at 153-54,
328. and Raz, supra note 15, at 86-87.
329. Raz, supra note 15, at 86.
330. This statement must be qualified by the fact that a court may refuse to apply a foreign law contrary to the public policy of the forum. See, e.g., Kilberg v. Ne. Airlines, Inc., 172 N.E.2d 526, 528 (N.Y. 1961) (holding that public policy of New York prevented application of damage limitation in Massachusetts death statute). It does not follow from the fact that a policy of the forum can defeat application of the foreign law that conformity with the policies of the forum is the reason for applying that law.
331. Raz, supra note 15, at 87.
332. 1 for different reasons. The law may simply intend to create ways in which individuals may achieve certain results even though these ways are not recognized by some other norms. The powers to make and amend the regulations of private companies are an example of this kind of recognition. They are normative powers because they affect the company's regulations, which are norms. They are recognized in law since they indirectly affect the duties of the courts to enforce these regulations. But a company's regulations are not part of the legal system, nor are they recognized in law because they are conventional social rules. These powers are powers directly affecting norms which are not laws of the system but they are given original rather than derivative recognition. Raz, supra note 15, at 86;
333. 2 ("[t]he law may simply intend to create ways in which individuals may achieve certain results"). I argue below that while there are conceptual connections between original recognition and the creation of powers, it is not so tight as this description suggests.
334. Raz, supra note 15, at 87.
335. The same would be so if, for example, the law's reason for recognizing a norm derived from a political principle of corrective justice.
336. The point is a more general one than the sorts of effects I consider here. An obvious example is the effect on religious practice of the state's recognition of that religion. As Steve Goldberg points out, for example, the time given the chanukiah (the nine-branched Chanukah menorah) on the public square has helped elevate it above other, more traditional symbols of Judaism. STEVEN GOLDBERG, BLEACHED FAITH: THE TRAGIC COST WHEN RELIGION IS FORCED INTO THE PUBLIC SQUARE 66-93 (2008).
337. See supra note 158.
338. Raz, Promises in Morality and Law, supra note 145, at 934 (emphases added).
339. "It may be that the facts which contribute to the argument for regarding promises as morally binding are also among the facts which make it desirable to make contracts binding in law. But it is these facts which count and not their results in morality." Raz, supra note 15, at 87.
340. Id. at 81 (emphasis added).
341. Id. (emphasis added).
342. Don Kimel takes this fact as grounds for arguing that an intent to exercise the moral power might well be a reason for preferring that legal liability not attach. Kimel maintains that the threat of legal enforcement casts a veil over the promisor's motives, interfering with the intrinsic value of promise-keeping in building and maintaining relationships of trust. KIMEL, supra note 102, at 74. As David Owens has pointed out to me, Raz does not think legal obligations must come with sanctions. That is, a contractual obligation might exist without any sanction attached to breach. But that is not the contract law we have. While different remedial consequences might not be a necessary feature of the legal recognition of voluntary obligations, it is a possible one. This is enough to block the general inference from an intent to undertake a voluntary obligation to an intent to undertake a corresponding legal one. Nor, as I argue above, are remedial consequences the only difference between a legal and extralegal obligation.
343. The above argument is the mirror image of Michael Pratt's suggestion that under-taking a contractual obligation does not necessarily entail undertaking a corresponding promissory one. Pratt, Contract: Not Promise, supra note 5, at 1-2, 8-9. While I agree with Pratt's argument with respect to promissory obligations, I would take issue with his premise that "[i]n order to form a contract[,] at least one of the parties to the bargain ... must perform a commissive speech act of the right kind.
344. " Id. at 1.
345. I am using "deceit" here to refer to both fraud and negligent misrepresentation.
346. See Markovits, supra note 98, at 1422-28 (describing Kantian idea that wrongness of lying inheres in liar's treatment of his listener as means to liar's ends).
347. And as I argued in Part III, even where we have a reason to expect speakers to want to be held legally liable for their misrepresentations, the law of fraud is not structured in a way that manifests a legal expectation of the same. See supra notes 102-07 and accompanying text.
348. Shiffrin, supra note 134, at 709.
349. See David Charny, The New Formalism in Contract, 66 U. CHI. L. REV. 842 (1999) (discussing return to formalism among many contracts scholars);
350. Schwartz & Scott, supra note 143 (advocating formalist law of contracts for business transactions). These divergences go beyond the points of departure Raz predicts based either on lawmakers' attempts at moral innovation or on the need to prevent people from taking advantage of the underlying moral practice.
351. Raz, Promises in Morality and Law, supra note 145, at 935-36.
352. Approximation might be a necessary condition of the other function Raz ascribes to contract: supporting the extralegal practice of undertaking and performing voluntary obligations. If contract law supports that practice, it would seem to be by making extralegal wrongs also legal ones.
353. E.g., FRIED, supra note 2, at 7-27;
354. Markovits, supra note 98, at 1448, 1463;
355. Shiffrin, supra note 134, at 749-53.
356. See supra notes 61-67 and accompanying text.
357. If one wants to look for legal doctrines that protect against the abuse of those norms, the law of promissory fraud and the tort of bad faith breach are much better candidates than the law of contract. For a defense of Raz's claim, see Sheinman, supra note 146, at 216-19.